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| Are oil companies taking unfair advantage of the consumer? CNN's Tom Foreman reports (October 29) |
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NEW YORK (CNN/Money) -
Oil prices slipped Wednesday on a government report showing stockpiles of crude and gasoline were larger than expected while distillates fell less than it was thought they would.
But the decline was tempered as the report showed demand may be recovering.
U.S. light crude for December delivery fell 10 cents to settle at $59.75 a barrel on the New York Mercantile Exchange. Oil fell about 11 cents a barrel before the report, slipped right after it, then rose above $60 before pulling back.
The Energy Information Administration said supplies of crude oil rose by 2.7 million barrels for the week ended Oct. 28. Analysts had predicted a build of 2 million barrels, according to Briefing.com.
The report also said supplies of distillates fell by 200,000 barrels while gasoline stocks rose by a million barrels. Analysts polled by Briefing.com had predicted an 800,000 barrel drop in distillates and a 900,000 barrel build in gasoline supplies.
But Wednesday's inventory report showed that demand for gasoline over the last four weeks fell 1.7 percent, while distillate demand eased 1.5 percent and demand for jet fuel declined 4.2 percent. Last week, the four-week average was down 2 percent for gasoline, 1.4 percent for distillates and 4.9 percent for jet fuel.
L. Bruce Lanni, senior oil analyst at A.G. Edwards and Son, said traders averted a steeper selloff after seeing the demand numbers.
"The (stockpile) numbers were essentially neutral, but we're starting to see a fairly good demand recovery," said Lanni.
Some analysts have said record energy prices would hit consumer demand sooner of later, while others have argued that the drop in demand seen in the weekly EIA report was merely a result of localized disruption caused by Hurricanes Rita and Katrina.
Distillates, which include diesel fuel and heating oil, have come into focus recently as the nation gears up for the winter season.
Heating-oil prices have soared recently as refineries hit by the hurricanes have struggled to get back online.
But warm weather in the Northeast, the country's largest consumer of heating oil, has taken pressure off both heating oil and crude prices for the last few days.
Brian Hicks, co-manager of the Global Resources Fund at U.S. Global Investors, said easing crude prices over the last few weeks, combined with still-tight global demand and the coming winter heating season, explained why there was no big drop Wednesday.
"It's not like we're at 52-week highs," said Hicks.
Crude was trading near three-month lows prior to the report after hitting record highs for the last several months sparked by tight supplies and rising demand in the United States., China and India. Prices reached an all-time trading high of $70.85 on Aug. 30 following Hurricane Katrina, which ravaged oil production facilities in the Gulf of Mexico in addition to the refineries on the coast.
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